Nvidia's OpenAI deal adds to a brewing concern. But will that actually hurt the stock?

Nvidia's $100 billion investment in OpenAI, which will utilize Nvidia systems, has propelled the stock to a new record, prompting Evercore ISI to raise revenue estimates by $5.5 billion for H2 2026 and increase its price target. While the deal intensifies investor concerns about Nvidia investing in companies that subsequently purchase its chips, analysts note the immediate demand landscape remains strong, with the company clarifying the investment funds will not be used for direct product purchases, suggesting continued positive financial impact into 2026.

Analysis

Nvidia's (NVDA) $100 billion investment in OpenAI, which includes the utilization of 10 gigawatts of Nvidia systems, has propelled the stock to a new record and prompted positive analyst revisions. Evercore ISI's Mark Lipacis has increased his revenue estimates for Nvidia by $5.5 billion for the second half of 2026 and raised his price target to $225, suggesting current Wall Street estimates may be too conservative. However, this deal also intensifies a nascent investor concern regarding 'circular' funding, where Nvidia invests in companies that subsequently purchase its chips. Bernstein analyst Stacy Rasgon noted these worries will be fueled 'much hotter' by this high-profile arrangement, despite Nvidia's clarification that the investment funds will not be used for direct product purchases. For the near term, the demand landscape appears strong, and with the first deployment not expected for another year, analysts do not view these sustainability concerns as an imminent threat. Furthermore, some analysts argue the stock's valuation remains reasonable, with its forward price-to-earnings ratio trading below its nine-year median of 36, presenting a potential opportunity even at record price levels.

Key Decisions for Investors

• Investors should weigh the immediate positive impact on revenue guidance through 2026 against the emerging long-term risk of 'circular' investment concerns, which could attract future scrutiny regarding the quality of earnings.
• Monitor disclosures and commentary from Nvidia and its partners regarding the structure of its venture investments to assess the materiality of the circular funding narrative.
• For those with a bullish thesis, consider that despite the stock reaching record highs, at least one analyst views the valuation as compelling, with its forward P/E trading below its historical median.